More Australians dispose of health insurance because of rising premiums

By Esther Han

14 February 2018 — 12:01am

In numbers

Australians who don’t have private health
insurance because they believe it's too expensive.

70%

The average rise in health insurance premiums this year.

3.95%

Australians with hospital cover

45.6%

More than 12,000 Australians ditched their hospital cover in the three months to last December, new figures show, as a separate survey suggests the key reason was they felt it wasn't worth the money.

Fresh quarterly data from the Australian Prudential Regulation Authority shows the percentage of Australians with hospital cover fell 0.2 percentage points in the December quarter to 45.6 per cent - the lowest in seven years.

Meanwhile, a new survey by consumer group Choice has found 70 per cent of Australians who don't have health insurance say it's because it's too expensive.

Health funds say the hike in premiums is due to rising costs of healthcare.

Photo: Joseph Feil

“With premiums up approximately 70 per cent over the past decade alongside of policies with a growing number of loopholes, it is clear private health insurance is no longer a good value option for many people,” said Choice's Tom Godfrey.

“With wage growth remaining static, more people are feeling pressure on their household budget and are rightly questioning whether they need to pay for health insurance.”

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Growing public outrage over spiralling premiums and confusion over exclusions led the federal government to announce a package of reforms last year, which includes cuts to the cost of medical devices on the prostheses list, but it appears it will take more time to see whether it can turn the tide.

Health Minister Greg Hunt last month approved an average 3.95 per cent increase in premiums - the lowest since 2001 - but Labor dismissed it as "business as usual" and announced plans to cap rate increases to 2 per cent for two years.

With the industry-wide hike to occur on April 1, Choice is urging Australians to review their policies but not be ensnared by the "fear-laden advertising" of for-profit switching websites or tempting gifts offered by health funds.

“Your best option might be to drop your cover and use the public system," Mr Godfrey said.

“Being able to choose your own doctor, go to a private hospital and avoid public waiting lists for an elective surgery does have some benefit, but it’s important to remember that every Australian already has health cover through Medicare."

The Choice survey found among health fund members, 15 per cent were planning to downgrade and 3 per cent were planning to cancel their hospital cover in the next 12 months. Twelve per cent said they would upgrade.

Health insurers explain

Industry body Private Healthcare Australia said it was working to keep premiums affordable and it was "irresponsible" of Choice to advise young adults to avoid health cover on the basis of age.

"If you have all your teeth knocked out in an accident, a sporting injury, an eating disorder or depression which keeps you from working, there is no guarantee you will be treated in the public hospital system as a priority or at all," said its chief executive Rachel David.

While acknowledging that hospital cover was losing favour, she said the number of Australians with some form of cover, such as extras-only, had increased by 0.02 percentage points in the December quarter.

In contrast to Choice's results, Dr David said IPSOS research repeatedly showed more than 80 per cent believed they got value for money from their health insurance, citing peace of mind, choice of doctor and choice of hospital.

She said there was only one reason for rising premiums - increasing "input costs", such as medical devices, hospital accommodation and provider fees.

Looking at APRA's statistics, she pointed out profit margins in the past year (5.16 per cent) and profits over the past decade (4.5 to 6 per cent) have remained stable.

“This report ... puts an end to misleading statements that 'some of the biggest health insurance providers pocket a return of over 20 per cent' [as mentioned by Opposition leader Bill Shorten]," she said.

But the peak body for medical device makers, Medical Technology Association of Australia, pointed out that Medibank stated at a Senate inquiry hearing last year that its return on equity was 29 per cent.

Reasons for the fall

Ian McAuley from the Centre for Policy Development said Australians were cancelling their policies because many had gradually come to realise that Medicare was adequate, their policies had exclusions, and they may be better off paying their own way in a private hospital, if necessary.

He said the reform to the prostheses list, while welcomed, was "low-hanging fruit" and Mr Shorten's 2 per cent cap plan was "politically opportunistic".

"It’s not that the insurers are greedy, badly managed etc. If so, they could possibly be reformed," he said.

"It’s that they cannot do the task of sharing the financial risks of health care anywhere near as efficiently or equitably as a single national insurer such as Medicare can."